Healing Your Financial Health Part II
Welcome Back!
If you are here because of yesterday’s invitation in the first post of this series, I welcome you back. If you are new to the blog then I welcome and extend the invitation to you as well, to join us in this series on healing your financial health. You can catch up by reading yesterday’s post entitled,
Payday Loans, Credit Repair, Money Saving Tips | Personal Money Store is Here to Help You!
So, where were we? I believe it was “ALL HANDS ON DECK”
Debt is a dangerous animal. It will take advantage of you today, it will take advantage of you tomorrow, and will continue to do so until the debt is paid off. As mentioned yesterday the average American pays $950 each year in debt. I don’t know about you, but i could sure think of some better ways to put that money to use.
Don't let minimum payments strike you!
There is a pivotal moment that occurs when accumulating debt. One day you wake up to find that you are only able to pay the minimum payments on your debts and are strapped financially to do anything more, and probably looking at payday loans more and more.
Minimum payments are the subtle serpents of the credit world. Consumers all too often look at them as convenient and affordable but these serpents can really put the bite on you if you don’t learn how to handle them correctly.
Creditors on the other have would prefer nothing more than for you to have to pay off your debts by paying just the minimum payment. Why? Because on just a $1000 debt, at a standard interest rate of 18% and a 2.5% minimum monthly charge on your balance, it would take you almost thirteen years to pay off the debt.
Due to the accumulated interest charges, paying the minimum payments on your debts does nothing but line the pockets of your creditors with your hard earned money. When dealing with multiple debts you can spend enough on interest each year that could otherwise have provided you some nice growth in your 401k.
If this sounds similar to your situation, your ship may be sinking and emergency attention is needed to prevent the situation from destroying your credit or even worse, giving you cause for bankruptcy.
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Is your financial ship sinking? Act fast to avoid drowning in debt!
Taking into account your debt load | How big is the hole in your ship?
Your circumstances may vary, and I will try to cover a couple different methods for helping you to get out from underneath your current debt situation. First I will assume that you are currently up to date with your creditors but have fallen into the minimum monthly payment routine and cannot afford to delegate any more funds than you currently are.
The first thing I would like you to do is write down each of your debts that you currently owe as well as the minimum monthly payment and interest rate that they are charging you.
Next, I want you to go to a website via the link below where you will find a payment calculator.
The True Cost Of Paying The Minimum
This calculator will allow you to input the necessary criteria for each of your debts and help you determine how long it will take you to pay off each of them. Don’t lose heart because the results you will receive will look like a financial prison sentence for the next several years. The point here is to give you a clear picture of your financial outlook and to help motivate you to change.
Now that you have taken inventory of your debt and the cost to deliver freedom to your financial future, let’s discuss how we can make these debts more manageable, and pay them off quicker, while potentially saving you thousands of dollars.
Stop Accruing Debt
If you can't stop spending, start cutting!
The first thing you need to do is eliminate placing new transactions on your credit cards and retail charge cards. Disciplining yourself to “just say NO!” to instant gratification is a must if you ever want to see yourself get out of debt. I would even recommend that you cut your cards up if need be in order to keep yourself from making unnecessary transactions, but I would not advise you to close your accounts at this time. We will elaborate on this later, but basically your account history helps your credit rating so if your creditors do not currently have any marks against you, keeping these accounts open and paying them off will be reflected very positively on your credit report. That said, it’s usually a good practice to keep your open accounts to a maximum of three to five. If you have more than that, consider just keeping open those which are the oldest and have the best interest rates.
Balance Transfers
What you need to understand now is how the credit industry works. This industry is highly competitive for your business. If your credit is in good standing you may be able to take advantage of this rooster fight by taking a look at the many balance transfer options that are made available in an effort to win you over to the other side.
These balance transfers allow you to transfer one or multiple debts to a new creditor for a small finance charge which will pale in comparison to the interest payments you are currently paying on a month to month basis.
Usually these balance transfers will give you a transfer rate of 0% for twelve to eighteen months. This means that everything you pay each month will be going directly to the principal of the amount owed. This gives you a lot of time to catch up and minimize your interest payments.
Better yet, some creditors, like Discover Card in a recent promotion, will allow you to continue this 0% APR on the original transferred balance provided that you make at least three purchases a month. Although these purchases will be subject to a higher interest rate, there is no minimum on the purchase amount of these transactions. The idea here would then be to make each of these purchases as small as possible by buying cheap items such as candy bar, pack of gum or gallon of milk. You can continue doing this until the debt is payed in full.
If this option is not available to you, you should still be able to find some low interest rate balance transfer options. Any balance transfer is likely to provide you a better interest rate than what you are currently paying. Once the low rate on your balance transfer expires you can repeat this process to continue taking advantage of a low interest rate and pay down your debts much more quickly.
A Note Of Caution
As you go about looking at your balance transfer options be sure to isolate the best offers and apply for them first. This is important because inquiries made on on your personal credit by each prospective creditor will appear on your credit report and deduct from your credit score, which is an indicator of your credit worthiness. Isolate your best options first and apply for those, and then move down the list.
Revisit the Results
Once you have found a good, low-interest balance transfer candidate for consolidating your debts, fill out the application process. After approval go back to the payment calculator and determine your savings in both time and money over the life of the debt.
After you have accomplished the above I want you to do one more thing. Would you leave us a comment telling our readers here on the Personal Money Store Blog and us, what deals you found, as well as how much you are now saving and the reduction of time that you will now be able to pay your debt off. We would greatly appreciate your feedback and desire to see your success.
Well, that about wraps up today’s portion. Now, you may be wondering what to do if you are unable to qualify for a balance transfer option due to credit that is not in good standing. We will dive into that tomorrow in part three of this series. Look for the blog article called “Consumer Debt | Negotiating with your creditors”
To your financial success,
-Personal Money Store
Your source of payday loans, cash Advances and free education on the responsible use of money!
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